Can Democrats Win Back Congress?

As Democrats eye the midterm elections later this year, can they actually win back Congress? Historically, the president’s party is vulnerable to midterm elections, especially when he has a low approval rating as in the case of Trump. That said, one large online prediction market only gives Democrats the edge in one of the two chambers.

Who will control the House after 2018?: Democratic (66%), Republican (40%)

Who will control the Senate after 2018?: Democratic (37%), Republican (68%)

If you’re wondering why the Democrats’ chances of winning the Senate are slim, consider that they will need to defend 26 seats in November compared to just 8 for Republicans. Additionally, five of the seats held by Democrats are in states where President Trump won by +18 percentage points, including West Virginia, North Dakota, Montana, Missouri and Indiana.

We agree with the prediction markets that Democrats still have a chance in the House, however, especially when looking at historical patterns. Post-World War II, the president’s party has lost House seats in 16 out of 18 mid-terms. The mean historical loss equates to 25 House seats, compared to the 24 Republican held seats that Democrats need to win.

Therefore, we looked at CNN’s Key Race Ratings to find plausible opportunities for the Democrats. Here is a breakdown of the data (link at the bottom of this note):

Sixty-one Republican seats are toss-ups (15), leaning GOP (21) or likely GOP (25) compared to just 22 Democratic seats that are toss-ups (4), leaning democrat (9) or likely democrat (9). This gives the Democrats some opportunity, and puts Republicans on the defense in terms of the House.

Democrats are especially looking to the suburbs to take over Republican seats, such as in “educated, diverse swing districts around Philadelphia, Minneapolis and Orange County, California”.

Of the 50 House members who have announced they are leaving Congress, 35 are Republicans compared to 15 Democrats. Moreover, CNN rated 11 of those Republicans’ seats as some of the most competitive races. One of the latest retirement announcements, for example, came from Republican Rep Rodney Frelinghuysen from a Northern New Jersey district where Trump only won by 1 point in 2016.

There are also 23 districts Republicans hold, but where Hillary Clinton beat Donald Trump. Four of those districts are represented by Republicans who are departing the House.

Republicans could also win some Democratic seats, however, particularly in exurban and rural areas where Trump performed well. There are four Democratic held seats that CNN rated as toss-ups in New Hampshire, Nevada, and Minnesota.

In sum, Republicans will likely keep control of the Senate, while the Democrats could well take a majority in the House. The latter still won’t be easy, but it is doable and they have most of the year to rally their base. This race will grow in importance to investors as the year progresses, especially with the possibility of grid lock in Congress. If the Democrat’s win the House, they can better disrupt President Trump and the Republican’s agenda.